Sunday, October 11, 2009

"Should Greenhouse Gas Permits be Allocated on a Per Capita Basis?" is an article by Eric Posner and Cass Sunstein appearing this year in the California Law Review. That is, should emissions cap per nation be assigned on the basis of the nation's population? Posner and Sunstein argue in the negative.

They begin their article by a lengthy and plodding exposition of the very different picture presented by per capita emissions and by national emissions. They would have done better to simply refer to David MacKay's illustration, I think.

By the end of 14 pages, the reader is expected to understand that China's total emissions exceed those of the US, but per capita emissions are only a sixth as high, while India's per capita emissions are barely a twentieth those of the US. Finally they assert the position they oppose:

With this background, we should be able to glimpse the intuitive argument on behalf of per capita allocations. Nations are not people; they are collections of people. A citizen of China should not be given emissions rights that are a small fraction of those of a citizen of the United States. Nor should a citizen of India be given emissions rights that constitute a small fraction of those of a citizen of Japan. Each person should count for no more and no less than one.

The opposite "end member" (as geoscientists like to say) of the spectrum of plausible models is the one where countries are allowed to emit in proportion to their existing emissions at some fixed recent date.

(Posner & Sunstein argue that this is close to the Kyoto model, which is peculiar given the reluctance of the US to participate. It would seem that such a model would fix a structural competitive advantage to the US for all time. That certainly isn't in line with the perceptions of Kyoto in the US, not just among the public but also among informed opinion. But that's neither here nor there for the present.

On the other hand, later in the paper they assert that the US would have borne half the costs of Kyoto had it signed, so I'm a bit confused on where they stand on this point, and on what the truth actually is.)

Other approaches are considered: a rather arbitrary per-nation distribution (wherein Luxembourg is a big winner and China and India the biggest losers) and a purely redistributive approach (where all initial permits are allocated to poor countries). C&S simplify these in a two-nation model.

The important point is that the number of permits issued is the control on emissions, and that actual emitting parties (individuals and industries, not nations) contribute a market cost on this constrained resource/right.

Those of us who'd prefer a simpler carbon tax apparently do not understand why this is preferable, but the consequences are rather the same - the nations must agree on who is allocated what fraction of future emissions, and the polluter pays something.

The essential question is - to whom should one remit the check? Should it go to the US government, say, or to the government of India? (This is the "trade" part of "cap and trade".)

On the cost side of the ledger, equal per capita emissions rights seems fairest.

C&S then identify three arguments against the per capita approach. The first comes from an observation that national per capita wealth is not correlated with national population. I have to say I have no idea what they are going on about here. Of course per capita allocations are per capita; national population has already been factored out. So this whole point seems wrong at the most elementary level. Hopefully I am missing something.

The second point proceeds from the point of view that because poor nations are more at risk from climate change, they get more benefit from the activity. Paying attention to the benefits side of the ledger moves the point of fairness back in favor of the richer countries, because they will have less to gain!

The third point is that allocations to poor nations will tend to go directly to the rich elites of the poor nations. (I have taken this into account in my repetition of my friend Mel's suggestion.) Even without this fix, I fail to see this as an argument against the ethics or practicality of a per-capita distribution of a carbon cap.

They then go on to list a couple of purportedly perverse consequences that might be set by a precedent of this sort. One is that governments would get a bigger slice of the pie as their populations increase, creating an incentive for increasing population! To this I say bollocks. Fix the population on which the allocations are made to the date of the start of the regime. Secondly, it creates an incentive for poverty! This is beyond bollocks.

Back in the days of the first incarnation of Ducks-In-A-Row Irene and I had a client, a small businessman who wouldn't bill his own customers because it would increase his tax liability. This is the same sort of "incentive". Except that even the worst run of countries isn't likely to be as confused as this fellow.

On the other hand, I guess important political scientists are that confused. What can you do?

OK, let me spell it out. Something that makes poor people slightly less poor is not an incentive to stay poor. Something that makes a rich person slightly less rich is not an incentive for the rich person to become poor. If finding a dollar on the ground is taxable at 20%, is that a reason for leaving the dollar on the ground? ("It's the principle of the thing, man!")

They do make a good point, though, here:

From an ex ante efficiency perspective, the best use of the surplus would be to reward the states that had taken steps in advance of the treaty to abate greenhouse gases.*' These states would probably be the European states that accepted binding emissions reductions under the Kyoto Protocol, though there are complexities here, since not all European states accepted meaningful reductions and others were simply taking advantage of independent technological and demographic changes in their country.

The larger point is that such a distribution would establish a precedent to the effect that when a global problem exists, states that respond quickly and in advance of a treaty will not be penalized. With this principle in place, states would be more likely to act quickly and to negotiate a treaty regime rather than drag their feet. For example, if states ever need to enter a new treaty that regulates cybercrime, they would know that first movers that have implemented controls that reduce dangers to other states would not be penalized and would even be rewarded in some way.

But then they go back to confusing people and countries with wild abandon:

Rather, our basic claim is that if these points are meant to provide a defense of the per capita approach, they run into serious difficulties. The reason is that the central objections to the welfarist argument rematerialize when faimess, understood in the ways sketched above, is our guide. First, to the extent that some of the most populous states are wealthy, the per capita approach is not fair at all since it has some of the same vices as the status quo approach. Second, per capita allocations have the disadvantage of giving large numbers of permits to highly populated nations that have relatively little to lose from climate change. Finally, it remains true that permits are allocated to the govemments of poor states, not to the citizens of poor states, and allocations to such govemments may not help those who are most in need.

I'm sympathetic to the third point, but the first two, again, seem completely confused to me.

So in the end I am left singularly unimpressed by Posner & Sunstein's arguments. I would simply call it a confusion between intensive and extensive quantities. They go on and on about the total population of countries as if this argued against per capita allocations, but of course, it argues for them. They spend a third of their paper on an elementary exposition best explained with MacKay's graphic (see link above) in a blink of an eye.

On the other hand, I have little difficulty agreeing with this conclusion of theirs:

In sum, the feasibility problem with the per capita approach is that it confiicts with the state system that currently organizes the world. States might well be willing to enter a climate treaty that mitigates climate change if the treaty creates restrictions that work off existing levels of greenhouse gas emissions. Doing so would serve their national interests. But given the current level of altruism that appears to exist, they are highly unlikely to adopt a distributive goal like that mandated by the per capita approach. To insist on the per capita approach, then, is most likely to subvert the best chance for a climate treaty and hence to render the climate change problem intractable.

Maybe so, but that's no reason for bogus arguments that such an unfortunate reality is the right thing. This confusion of the prescriptive and the descriptive seems to me to be a fundamental intellectual error of our time.

Perhaps we will not achieve the optimum, and some of the reasons are explained fairly cogently in Posner and Sunstein. But that is no reason to argue that optimum is other than a fair, per capita distribution; indeed arguments from what is politically feasible should not appear in an article discussing what solution is optimum from a given point of view.

18 comments:

So Eli will play the bad bunny. The population of China and India has grown by much more in the past ~50 years than the populations of the US and Europe. In fact, much of the growth of population growth of the US and Europe has been from immigration from India, China and underdeveloped countries.

OK, lets allocate by population in 1950, suitably corrected for migration.

I'm partial to 1992 as a baseline, because that is the year when the international consensus emerged that a policy problem exists. We are all guilty of whatever we did since, regardless of whether our claim to innocence before that date rings hollow.

I'm not sure how the migration thing would work. If there were a huge migration (say Mexico to the US) in the intervening years since the baseline, would that count to the advantage of Mexico or the other way around?

Would you be so kind as to pick some round numbers for country A and country B and show what result you'd prefer?

Both China and India had empires in the past, with large areas of economic dominance. They hoarded technology and wealth. They (along with the Persians, classic Greeks, and later Romans) wrote the rules and established the principles and traditions of empire governance. Now, they want us to play by different rules.

I do not care. We have only one future. We must work very closely together or all will fail. All must sacrifice much. Nobody, but nobody has admitted in public how much sacrifice will be required. I do not belong to any respectable organization, so I can say it -- All will sacrifice much. Many will sacrifice all.

Lawyers and diplomats may talk and negotiate, but Mother Nature makes the rules.

An interesting approach is taken in this article:"Sharing global CO2 emission reductions among one billion high emitters"http://www.pnas.org/content/106/29/11884(disclaimer: There's a colleague of mine on the authorlist)

From the abstract:"All of the world's high CO2-emitting individuals are treated the same, regardless of where they live." (eg amongst half a billion of very poor people, there are 50 million rich, high emitters in India. They should be treated the same, as, say, the French.) The last sentence of the abstract is also noteworthy (esp when rebutting Lomborg style arguments): "We also modify our methodology to place a floor on emissions of the world's lowest CO2 emitters and demonstrate that climate mitigation and alleviation of extreme poverty are largely decoupled."

Per capita capping is problematic. Industries (most industries are global already and most stuff goes to export) move to countries with large poor populations, and they can pollute more there than they would have in their old country of residence.

Yet for the climate it is irrelevant where the pollution happens.

Hence it's not a good solution for climate - it could actually increase pollution, encouraging less efficient industries etc..

Caps should be industry specific then... Distribution by auction, no quotas... No matter where the factory is.

Or then a tax system.

It's surprising how inane all this discussion is. I guess the law community has to start from somewhere and we should be glad that there is some discussion in the first place!

The encouraging of poverty would mean farming lots of poor low CO2 people to enable the CO2 producing industry with their quotas. The industry being owned by some others than the said poor people.

There is a mechanism that I see there quite clearly.

It would be slightly more analogous to the tax avoiding businessman if it was one businessman who only got the income and the other who only paid the taxes of the same business! Of course the latter would avoid doing business.

Assuming that the permit allocation is done at the national level, scaled to population of the country, there is no reason why industry would need to move to the nation with excess permits: that nation could just as well sell the permits to the nation where the industry already resides, and just take the cash.

Therefore, a truly global cap does not have the same leakage problems (eg, between nation leakage) that a limited region cap might. And because it is a cap, emissions within the capped sectors by definition cannot exceed the cap, so total pollution within the capped sectors cannot increase. Inefficient industries will suffer regardless of where they are.

More worrisome is sectoral leakage: we see this in the bio-fuels area, where if deforestation and land-use aren't included properly, then the system could migrate from "well-counted" emissions to non-covered emissions...

Marcus, the problem is with free quotas - in a country with more poor people you can get a larger free quota for a specific factory - hence the global incentive to move factories there or keep the there-residing low tech factories operating.

This is all hypothetical of course, I haven't checked if it's such a big issue in practice. Might just be industry noise generation over minor numbers.

Of course the poor contry can also make a buck selling the leftover quotas on the global market - Russia has done it with good profit since their industry collapsed just after the Kyoto reference year.

But it still doesn't level the playing field.

At least I think I think like that, I'm a bit sleep deprived today...

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Monbiot misses one big point though - if the poor want to have a better material standard of living, they have a problem with numbers...

It's easy in this discussion of the merits of per capita allocations to lose sight of part of what's really at stake here. Most of Michael's readers will likely never read the article itself. However, since I in fact "assigned" the article to Michael (it's optional reading in a class of mine he's auditing over the internet), I've been forced to read it - most of it twice now - What's stunning is, given how smart Posner and Sunstein are, just how bad it really is.

It's so bad, that it comes across as almost disingenuous - these folks are so anxious to show that supporters of per capita rights are actually the source of the problem, that they don't even bother to check whether their arguments are coherent or consistent.

Perhaps its a reflection of the fact that they are both lawyers, and the goal of a courtroom lawyer is simply to sow doubt in the guilt of his or her client. Of course, neither of them is primarily a courtroom lawyer, I think. Sunstein, rather scarily, is now the Administrator of the White House office of Information and Regulatory Affairs.

If you read the article you'd see further that they simply dismiss the idea that people might care about equal per capita rights because it's actually fair; rather they slip right into assuming that any such people must actually be welfarists who really just want to distribute money to poor people. And of course if that's your goal, equal per capita allocations aren't the most efficient. But, as the authors note, that aid ain't comin'... and, unlike "foreign aid," poor countries don't actually have to be "given" permits. As I have often said, poor countries don't need our permission to burn their coal (or their trees).

If human individuals would get CO2 quotas and they could trade them on the international market personally (not their nation). Then perhaps there wouldn't be "leaks". Industries anywhere would and could buy their quotas from China, India, Pakistan, Bangladesh, Indonesia...

You would still have to do the reductions in personal quota size from an overviewing level to drive down CO2 emissions. Just relying on the effect that some people wouldn't sell their quotas (as a charity move) would be unfair.

This paper sounds like classic Sunstein. Shallow, pompous, long-winded and mostly wrong. Wait 'till you see their book on the subject. More of the same, but drawn out over a few hundred pages.

The only valid moral argument against per-capita quotas is that it gives no incentive for population control, and Peter Singer pointed out that (and the fix) more cogently years ago, in his essay One Atmosphere. Actually, if you're worried about needs to discourage excess populationgrowth, it's the US that is the one that needs incentives. We have a high fertility for a first-world country and will probably add another 100 million people in the next 50 years or so. Given our per capita emissions, thats something like a half billion Chinese.

And the Chinese never get enough credit for the effect of their draconian population policies (some quite morally questionable, I admit) on CO2 abatement. Arguably, this has done more than anything else anybody has done, in the way of reducing CO2 emissions.